renters insurance
Most tenants don’t know that having adequate coverage as far as insurance goes is not the landlord’s responsibility. It is the tenant’s responsibility to make sure they are covered under every circumstance. Most tenants think that it is the landlord’s job to protect their personal belongings from being stolen or damaged while they are living in your property.
This is a huge misconception on the part of the tenant. The property’s insurance policy strictly covers damage to the building classified as “non-negligent” and anything that effects the loss of the landlord’s personal property (as owner of the building).
If a tenant wants to be fully protected, they should strongly consider renters insurance.
Renters insurance provides coverage for a tenant’s personal things as well as covering the tenant (also known as liability coverage) just in case the renter is found responsible for property damage due to negligent behavior. It also covers a guest of the tenant getting hurt should that guest happen to get injured in the tenant’s apartment. And almost every policy will cover medical payments should the guest require medical attention due to an event that occurred in the tenant’s apartment.
When paying a claim, the insurance company will determine payment based on whether the tenant has a policy is an “actual cash value” policy or a “replacement coverage” policy.
The more expensive option is a “replacement coverage” policy because it pays the insured what it really costs to replace the stolen or lost items (minus the deductible).
The less expensive option is an “actual cash value” policy which pays the insured what the lost, stolen or damaged property is worth at the time it needs to be replaced (minus the deductible).
But what are the benefits of making sure renter’s buy insurance before signing their lease agreement? Well, even though your tenant has this insurance policy, it doesn’t have any bearing on the amount of homeowners insurance you will need to protect yourself adequately and be fully protected.
As a property manager, you should know that just because the tenant has renter’s insurance, it doesn’t protect the landlord in all instances of potential liability problems. You are still responsible as the landlord for keeping the common areas clean and kept up. These areas include sidewalks, stairwells and the parking area. You will also be responsible as the landlord for accidents and damage that is a result of non-negligence that occur in the aforementioned areas. As a landlord, you should be aware that the tenant is only responsible for areas that are under their control (i.e. – the rental apartment).
Does it make sense as a landlord to require your tenants to have a renter’s insurance policy? The answer resides in simple economics. If you end up paying for damage that was caused by a renter’s negligent behavior, it can get pricey. If your renter is not insured, you might have to raise the rent for everyone in your building which might make him or her consider vacating your property. The other option is putting a claim into your homeowner’s policy and receiving higher premiums on the future.
On the other hand, if your renter has his own policy, there is a third option that will far surpass the first two scenarios listed above. Why? Because it takes the burden off you as the landlord to come up with the money you will need to repair the situation. If you simply keep up with the general maintenance of the property (regardless of costs), you will ultimately save money in the long run. The chances of something happening due to poor maintenance upkeep will be slim to nil.
Personally, I keep my buildings in top notch shape and “strongly suggest” to my new tenants that they get a renters insurance policy pointing out the obvious benefits to them as renters. Without exception, every time I have done this, regardless of whether they have followed through or not, they have thanked me for making it clear what is and is not their responsibility. We start their tenancy off on the right foot for both of us!
Stirling Gardner (The Hollywood Landlord) is a writer and property management expert.
He consults for EZ Landlord Forms and loves it.
EZLandlordForms.com has your state specific lease agreement as well as free rental applications
He highly recommends you check out the site when you get an opportunity. It will save you countless hours, dollars and headaches.
Why Renter’s Insurance? Apartment Fires! (Wow… Baby thrown from apartment window)
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